Texas senators file bills to create room for tax and debt relief

Community Reports

Published 12:19 pm, Wednesday, March 4, 2015

State budget writers would have more flexibility to implement tax cuts and pay down state debt under a package of legislation unveiled at a Wednesday press conference. The Texas Constitution limits spending to no more than the growth of the Texas economy in a given biennium. The problem, said Lt. Governor Dan Patrick, is that appropriations intended to cut taxes or reduce state debt also count against this spending cap.

“Because of the cap we are limited in what we can do,” he said.

This puts critical funding needs for the state in conflict with tax cuts and debt payments.

According to the Legislative Budget Board, the Texas economy grew nearly 12 percent last biennium, which means the state budget for the 2016-2017 biennium cannot grow more than that. The current Senate budget proposal, including $4.6 billion in property and franchise tax cuts, will still leave nearly five billion dollars in state coffers. If lawmakers wanted to pass more tax cuts or debt service, they could run into the spending cap. Senate Finance Committee Chair Jane Nelson said that isn’t what the spending cap is for.

“We all know that the intent of the provision was to control the growth of government,” she said. “Giving money back to the tax payers does not grow government.”

Senate Finance Committee Vice Chair Juan “Chuy” Hinojosa highlighted the problem of growing state debt and how the spending cap can make it difficult to pay down that debt in times of state prosperity.

Since 2004, he said, state debt has grown 188 percent and the state now owes an estimated $75.5 billion.

“That debt will not go away unless we are responsible and find ways to not saddle future generations with debt,” said Hinojosa. “That debt will lead to interest and taxes sometime in the future.”

The Senate budget includes $3.9 billion in debt service, but if Senators wanted to increase that amount, the spending cap again becomes a concern.

There has been much debate this session about passing billions in tax cuts while many state programs and facilities are in need of funding. Tyler Senator Kevin Eltife has been a strong voice in this debate, saying that paying for critical state services like state pension funds and infrastructure should remain a priority.

“This session my concerns have been, ‘how do we address the needs of the state’?” Eltife said, adding that the bills discussed Wednesday for the first time show him that there is a path to meeting those needs.

The bills laid out at Wednesday’s press conference would allow voters to decide whether or not to exempt tax cuts and debt payments from the constitutional spending limit. This would give future legislatures more latitude to grant tax and debt relief without cutting funding to critical state needs.

As for the current legislature, Patrick said budget writers could include contingency language that could trigger additional provisions should voters approve these measures, which he views as a likely outcome. Also Wednesday the Senate approved two measures intended to increase transportation funding.

SB 5 and SJR 5, by Transportation Committee Chair Robert Nichols would ask the voters to approve a split in the state motor vehicle sales tax.

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The first $2.5 billion in money from that source would still go into general revenue, but the next $2.5 billion would be dedicated to the Department of Transportation. Further revenue would be split evenly between general revenue and transportation.